Reader Mailbag: Friends

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.1. Tossed into the “real world”2. Dealing with flooding3. HSA contribution question4. Spouses and kids5. Index fund or savings account6. Snowballing versus interest payments7. Letting my cousin move in8. Mortgage free! But a problem…9. Targeted savings questions10. Investing in foreign currencies

Every Thursday night, I have a “boy’s game night” with some of my close male friends. We play a variety of games – you can imagine it as “poker night with games besides poker.”

Anyway, due to scheduling conflicts, we haven’t been able to have this game night the last two weeks, with it resuming tonight.

What amazed me is how much I missed it in the interim. During those two weeks off, Thursday would roll around and I’d feel a bit bummed out that there was no “game night” that night.

What did I miss? The people, more than anything else.

Q1: Tossed into the “real world”
I am 21 and going to graduate in 2 years and when I do I will get thrown in to the “real world.” I currently have had the same job for 2 years (minimum wage, part time in school, full time during summer) but I haven’t had to worry about health care, 401k’s, retirement or anything else that comes with a professional career. I know the best way to get ahead is to start planning early. Could you recommend some books, posts or anything that could help me understand what will happen once I make it to the “real world.” Would it be beneficial for me to visit a financial planner once I graduate? and is there anything I can do now to help prepare?
– Briana

There are a lot of books that are just perfect for your situation.

My single favorite book for your situation is Michael Masterson’s Automatic Wealth for Grads. While it has a bit of an entrepreneurial bent, it does a very good job of focusing on the concerns and issues of a forward-thinking college graduate, which is exactly where you seem to be heading.

I do not think a financial planner is a good expense for someone freshly out of college. Hit the library and read these books instead and you’ll know what you need to know.

Q2: Dealing with flooding
I live near the Missouri river on the Iowa side and am worrying myself sick about what is going to happen and soon. They are saying Thur or Fri this week (2-3 days). I have been cutting my spending and paying large chunks off my student loans and finally getting on my feet, but it seems like every time I can see the light at the end of the tunnel something happens and knocks me back down. I live in an area that does not require flood insurance so I did not buy it and now it seems imminent as houses as close as 6 blocks are getting ground water in their basement. I have a crawl space and of course, my furnace is placed there and I may get anywhere from 0-4 feet of water. I have only saved up about $1200 in an emergency fund recently. How can I, and many others, deal with a disaster like this? Especially since I may lose my house to flooding and am not covered by insurance?
– Nikki

Your best hope is that your area is declared a disaster area and you then receive help from FEMA. I would also seek help from any and all family members and friends who can help you in the short term, perhaps helping you with shelter, meals, and advice.

I’ve been through the Mississippi River flood of 1993 and I watched how FEMA helped people. They provided temporary housing for a lot of people (in the form of trailers) as well as many other kinds of aid. It still doesn’t solve everything, but it helps.

My suggestion to everyone is that unless you live on top of a hill, you should have some form of flood insurance. Know the risks associated with your home’s location and protect yourself accordingly. If you live in an area that’s significantly outside of a flood zone, the cost should be pretty small, but it’s well worth it. Floods are devastating.

Q3: HSA contribution question
My husband lost his job in July 2010. Initially we added him to be covered under my work insurance. But we were having to pay $750+ month for the premium and he NEVER goes to the doctor.

So in October 2010 we started shopping around for a cheaper insurance plan. We finally decided to get him on a Blue Shield High Deductible individual plan that is compatible with an HSA. His individual coverage began 11/1/10. We opened an HSA account for him immediately. We maxed out the HSA for 2010 with $3050. He remained with this individual high deductible plan from 11/1/2010-2/1/2010.

Open enrollment at my work is in February. We realized that if we moved my husband back to my work coverage and got a high deductible plan for the both of us, then my company would contribute enough to cover all the monthly premium and we wouldn’t have to pay anything out of pocket each month. So, beginning 2/1/2010, we both got on my company high deductible plan that is HSA compatible.

My question is: How much are we allowed to contribute for 2011 for the both of us? I had been saving as if I could contribute the maximum $6150 for the both of us for the year. But now, I am worried that I am not allowed to contribute that much since I only had a high deducible plan since 2/1/11.
– Laura

My understanding is that you are allowed to contribute the full amount, though you may want to contact the HSA manager to be sure.

Having said that, I’m not sure that contributing this much money to a HSA is a great idea in your situation. You both seem to be in pretty good health and rarely use medical services. Contributing $12,300 a year seems like an incredibly large amount.

Some of that money would most likely go to better use paying off debts and securing your financial future for your healthy selves. Having some security is a good idea, but having too much can hinder you.

Q4: Spouses and kids
With three small children and two careers, how do you and your wife stay connected? We have two careers and two small children and my marriage is extremely important to me so I’d love to hear your frugal ideas on how to stay connected and in touch as husband and wife.
– Jennifer

Right now, our usual method is to insist on an early bedtime for our children. One parent is responsible for putting the kids to bed, while the other parent handles household chores (cleaning up remaining supper dishes and the like). This usually gives us an hour or two before bed to do something together.

We usually try to spend that time doing something where we’re actually engaging each other, like playing a game or just having a conversation.

You don’t have to do something special to connect. You just both have to set it as a priority.

Q5: Index fund or savings account
My wife and I are in our mid-twenties and are aggressively paying off our student loans. We expect to have them paid off in the near future which will leave us with an extra $1000 a month. We have no other debt besides our mortgage (which we pay about 10% extra on each month). We contribute 12% to our retirement accounts and have a $12,000 emergency fund. Once the student loans are paid off we would like to start saving to purchase a newer vehicle for my wife and eventually one for me. We would contribute money to this account every month and whenever we need a newer vehicle we would pull from it. We are torn between keeping the money in a savings account which is safe, but has less than desirable interest rates and opening some sort of investment account, such as an index fund from Vanguard. I am slightly on the risk-tolerant side and my wife is slightly on the risk-adverse side. What are your thoughts on putting this money in an index fund versus a savings account?
– Jeff

If you need to have a specific amount of money at a certain time that’s coming up in the next few years, an index fund is a poor place to put it. The stock market is incredibly volatile, with years where you see 40% losses (2008) immediately followed by years with 20% gains (2009). You can’t rely on getting the exact return you want when you want it from the stock market – in fact, you can’t rely on a gain at all over a period of less than ten years.

In short, I view investments in stock-based index funds over a period of less than ten years as being akin to gambling. There are ten year periods where the average annual growth is 12%. There are ten year periods where the average annual growth is -2%. When you look at shorter periods, you see even more volatility. You have no idea what the next ten year period will be like.

Now, if you’re willing to accept that you might throw $4,000 into the account over the next three years and have only $3,000 when you withdraw, but you might also have $5,500, then index funds are the way to go. Otherwise, I’d use savings accounts.

The real factor is how high your “minimum car” standard is. If you’re going to save $250 a month toward a car and would be fine buying a $4,000 car in three years, then by all means use an index fund – you’ll probably be very happy with the results. However, if you’re saving $250 a month and expect at least a $9,000 level car in three years, I wouldn’t bank on the index fund.

Q6: Snowballing versus interest payments
I know there are pretty much two schools of thought on debt repayment… one being to pay the smallest debt first, and the other to pay the one with the highest interest first. You’ve mentioned in the past that either method is good as long as you’re working towards that goal… but I’d love to see the actual numbers for my own situation. After finishing college I was able to pay down a good portion of my debt within the first few years… here’s what I’m left with:

Mortgage – owe $61,500, interest rate 6.25% (we have no intention of staying in this house and wish to move back to the state we’re from – we’re currently doing projects around the house to make selling easier when we decide we’re ready)
School loans – $34,300 owed, interest 6.75% (this interest rate freaks me out)
Car – $10,200 owed, interest 3.37%
Closed credit account – $2,800 owed, interest 1.99% for the life of the balance.

Now the snowball method says to knock out the $2,800 closed credit account first, but with such a low interested rate (it ends up being about $4 a month) it seems silly to me to pay off the $2800, when I’m paying the highest interest on the school loan. I pay double the minimum payment on my school loan – which ends up being almost what my mortgage payment is. Next theoretically I’d pay off the car…. but then I’m knocking out the two lowest interest rates and leaving the accumulation of the highest interest rate on that $13,000 during that time. Granted, paying the school loan first takes the longest. I’d love to see the real numbers… if the difference is negligible, I might as well knock out the smaller debts first…. I feel like in the long run I’m saving some money my way…. but is this accurate?
– Amanda

I usually don’t advocate the snowball method, at least as Dave Ramsey does it. It’s almost always better to tackle debts in order of interest rate. The big advantage the normal snowball method has is that it gives you the rush of having paid off your first debt the fastest.

If I were you, I’d hammer those school loans, then hammer the mortgage. Make minimum payments on the other two until both of the big ones are gone.

I could run numbers for you, but any model you make of these things would show you that taking care of the 6% loans first is the best move over the long run.

Q7: Letting my cousin move in
My 18 yr old cousin is about to graduate high school and may well not have a place to live

Without going into a lot of details, my aunt has told him to live with his father and his father’s girlfriend does not want my cousin in her home (where his father resides).

I love this kid and while I think he is not perfect (what 18 yr old is?), I feel as if his parents are washing their hands of their responsibilities.

I’m thinking of offering him the opportunity to move in with me for one year — long enough for him to start school and get his feet under him — I know this is a big change and part of the offer would be a mutually agreed upon set of house rules and regulations.

Am I crazy? Am I taking on something too big for me?
– Jason

This is a very risky move – and one I probably wouldn’t directly do. It has a lot of potential to end badly, particularly when you mention a “mutually agreed upon set of house rules and regulations.”

This sounds like you’d want to become a surrogate parent, and becoming a surrogate parent of someone who basically just got kicked out of their home is not something you want to do.

I’m all in favor of you helping him, but cohabitation is likely to bring problems into your life that you aren’t planning for and don’t want. Find other ways to help, like helping him get a job, get his money straight, and other things like that. Teach him how to be an adult instead of just being another parent.

Q8: Mortgage free! But a problem…
My husband, 2 year old son and I live in a small bungalow on a 4 lane, busy, mostly commercial street in an area just north of Toronto. My husband purchased the house for $220,500 10 years ago and we still have $120,000 left on the mortgage. We both work full time at the same company – only 20min drive from home (our son’s daycare is 10min away and on the way to work). Our house and 2 others on the block are currently tied up with a development deal. A developer wants to take down our homes and build a commercial building. This deal has been 2 years in the making and has been extended 3 times. It now looks like it will be finalized and we will have to purchase a new home. The price we would get for our property is $540,000 (not a bad return on investment).

Of course we have been keeping an eye on the real estate market for the past 2 years.

Throughout this whole process we have been hoping to purchase a house and be mortgage free with some extra in the bank. We have no debts except for the house and a car. The problem is that in order to do this we would need to move farther from Toronto and increase our daily commute from 40min to almost 2 hours. Job opportunities would exist in the new city however the pay would probably be much less. We would both like to find new jobs and my husband is considering a career change. We feel that being mortgage free would open up more opportunities for us as we wouldn’t need to make the same amount of money as before. In addition, we could commit to staying at our current jobs for a certain period of time while we work on making a change. The increase in costs with the longer commute still wouldn’t add up to a mortgage payment. We actually have 5 coworkers who live in the city we are considering.

The other option of course is to find a house close to work. We would still have a mortgage and the homes in the area are, quite frankly, overpriced. While we wouldn’t have the commute I also feel like we would have missed a great opportunity to get ahead. This type of opportunity doesn’t come along every day and we want to make the most of it.

Do you have any suggestions on how we should work out the pros and cons of our options? Are we missing anything? I know you must get hundreds of emails but we would be very interested in knowing your thoughts.
– Wendy

My initial reaction would be to ask if there wasn’t some form of mass transit you could take for your commute, which would reduce your cost of living in the city edges even more.

Many of my friends that live in large cities do just that. They drive to a mass transit station, take the train into work, take the train back to that station, then drive home. They all report that it’s far cheaper to do it that way than to drive, and possibly quicker, too.

I don’t know what mass transit around Toronto is like, but I would look at that as a big part of the equation. If you have that kind of access to the city, I see no reason not to live on the outskirts, especially if the housing is that much cheaper.

Q9: Targeted savings questions
I’m in the process of paying debts down, and once I get those taken care of, I plan to create some targeted savings accounts and use what I was paying previously to fill them up. I have a few ideas for them already, and I don’t plan on going nuts and having fifteen different accounts, but I’m wondering if you do this, and if so (or even if not), what you would suggest. I have a standard savings account already, and an emergency fund in an ING account, and these are the others I was planning on creating:

– Travel/vacation fund
– Maintenance fund (things around the house, appliances, automobile, things like that… not emergencies, exactly, but still things that might come up)
– “Saving for” fund (for instance, I’ll need to replace my computer soon, and that would go there. After that, it could be whatever…a new camera, furniture, any larger purchases)
– Christmas/birthday/other holiday gift fund (probably enough for each member of my family in a given year)

Any other suggestions?
– Drew

Those are all good ideas.

This is really a great approach to have for saving for the future. All of these funds will help you down the road and will keep you from going into debt for things that you know are going to happen.

I would also include one other item that I consider essential, a “car fund.” We did this for our last car purchase. Right now, we’re looking at six years without car loans, which is wonderful for our finances and monthly cash flow.

Q10: Investing in foreign currencies
In today’s email you mentioned investing in foreign currencies. How does one do that (or how do you prefer to do that)?
– Aimee

The easiest way to invest in foreign currencies is to buy an ETF of the foreign currency you want to own. You do this in much the same way you would buy stocks. You simply go to your brokerage (say, E*TRADE), buy the ETF as if it were a stock, and sit on it.

An example of such an ETF is FXE, which is basically the equivalent of buying Euros. There are similar ETFs for many foreign currencies.

Much like individual stock buying, you can go very deep into buying and selling foreign currencies. Unless you want it to become a lifestyle, though, I’d stick with ETFs for investment purposes.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

Trent, $6150 is the FAMILY max – she wouldn’t be contributing that amount for each of them, she’d be contributing that amount for both of them combined. Not $12300.

Also, once you’ve gotten your HSA account up to the level of the annual deductible, and if you’re in a situation where you don’t use it a lot (i.e., would only really need for something catastrophic), you can feel free to lower your contribution amount to more of a maintenance level. This is what we’ve done – now adding enough to grow it a little and cover our one prescription medication (under the HDHP offered through our employer, preventative care is fully covered). Even when you add the contribution and the small premium we have to pay, it’s still much cheaper than the premium for a traditional plan.

Q3 – Yes, Allie! Also, many policies also have co-pay amounts up to a certain max, so you might want to get the HSA to meet both the deductible (x 2, one for each of you) AND the max co-pay you might be responsible for. Getting insurance & related finances in place before you need it is critical – just because you’re in good health today doesn’t mean you couldn’t be hit by a truck, slip in the shower, or develop a major disease. Many people in financial trouble these days are there because of a major medical bills that they weren’t prepared to pay.

i think that family is important and helping out a younger cousin can be a good thing.it depends on why he is no longer welcomed in his family’s home. i would have a long conversation with him first and if you still think you’d like to help, explain that your help is available for “x” amount of time as a trial. have a lease agreement drawn up that will cover all the rules,regs, responsibilities and expectations and go from there.
sometimes all that is needed is to be give an opportunity. if it doesn’t work after a trial period send him on his way. good for you both if it does.

Q7, Jason: I think it’s really awesome and generous that you’re thinking of letting your cousin move in with you for a while. Whether it’s “something too big for you,” though, depends on a lot of details of your specific situation that you haven’t mentioned.

What’s your living situation like already? Do you have a spouse, kids, other roommates? What kind of space do you have in your home? I assume you have space for your cousin to have his own room?

How old are you? Trent got the impression that you want to act like another parent, but if you’re only a few years older than your cousin, that makes for a different relationship dynamic.

Is there any particular reason you think your cousin would be difficult to live with? (Does he have any destructive habits or problems with authority?)

What are your cousin’s immediate plans for his life? You mentioned him starting school – is there a particular college he plans to attend in the fall? If so, is there student housing there where he could live?

If this is a case where he has an immediate need for a place to stay (i.e., he gets home from high school graduation to find that his parents have thrown all his stuff on the lawn and changed the locks on the doors) maybe you could consider letting him stay with you for a shorter period of time, like a few weeks or a couple of months. During that time, you can help him with the logistics of finding a place of his own.

I think Jason is very generous, and I agree that it’s right to be cautious before taking such a big step, but I wouldn’t necessarily advise against allowing the cousin to move in. All tenants, no matter the relationship to the landlord, have to abide by some “house rules and regulations.” That doesn’t mean acting as a surrogate parent.

This kid comes from a broken family. He is 18 and so far has no higher education, which likely could mean a minimum wage job at best to start. Which means he will find it difficult to live within means even if he’s frugal — so if nobody helps him, he could wind up in a mountain of debt. Even in normal times, but especially in the current economy, 18 year olds are generally not yet equipped for real life completely on their own.

Q3 – Read the IRS publication. You already over-contributed on the 2010 HSA. On an individual HSA, you are allowed to contribute up to 3050, but the amount is prorated over the months you were actually in a qualified plan. Since you started the insurance on Nov 1, your max contribution is ~$508(3050 * 2/12). For 2011 (January), max is ~$254 (3050 *1/12). Feb-Dec is ~$5637.50 (6150 * 11/12).
So, you over-contributed in 2010 and are well on your way to doing it again in 2011. I haven’t read up on penalties.
It would be nice if Trent could explore the benefits of an HSA instead of yet another rehash of making laundry detergent and frozen burritos.

@Roger re:Q3, isn’t there some provision that you can max out the account ($3050) immediately, as long as you remain eligible for the following 12 months?

Others have pointed out that $6150 is the TOTAL contribution for the whole family for 2011.

I would like to point out that an HSA is pretty much the best kind of account ever invented. The money is tax free going in and tax free coming out. If you have access to an HSA, you should max it out every year, even if you have to cut back on contributions to other tax advantaged accounts to do so. (Though it’s not so good as to overcome a decent employer match in a 401(k)).

Q8, Wendy: Whatever you do, I would suggest not planning to have the 2-hour commute (that’s round-trip, I guess?) for any substantial length of time. Of all the things that can negatively affect a person’s quality of life, a long and stressful daily commute is one of the biggest (and one of the most underestimated, meaning that people don’t think it’s affecting them as much as it actually is). And doing a long commute by mass transit can relieve some of the stress, or it can add a whole new set of stresses (if the transit mode you’re using is crowded, infrequent, or unreliable) – it depends on the situation.

So I’d suggest you choose between finding a new home near where you work now and finding a new home *and* new jobs in the more far-flung city. As for how to choose, well, which would you prefer? Do you like where you’re living and working now? Do you think you would like living and working in the other city? If you want to analyze the situation financially, then total up ALL the income and expenses you expect to have in each city, and figure out which one comes out ahead. Don’t let your emotional response to being “mortgage free” carry too much weight – if your income would drop by as much or more than the mortgage payment would be, then that is not a good deal.

Would it be worth considering renting a home, rather than buying one, in the city where you work now? If houses there really are “overpriced,” could it be that you’re still experiencing a housing bubble (which means that renting would be cheaper for now and that prices are likely to come down soon)? I don’t know anything about Canadian real estate, though, so if this suggestion doesn’t apply, ignore it.

Q4 – A lot of couples make ‘date nights’ a priority, on whatever regular basis makes sense for you. It doesn’t have to be an expensive date – even a picnic in the park or a nice long walk in the park while the kids are with a babysitter. You can trade babysitting duties with friends who need a date night too.

For more routine time as a couple, we are morning people, so during those hectic years we’d get up early for a quiet breakfast & talk together instead of scheduling it at the end of the day (by then I usually wanted time to myself).

Roger, there’s a Last Month Rule allow for a full year’s contributions for Q3’s situation.

So to answer her actual question, yes she can contribute $6150 to the plan, so long as they are still enrolled in any eligible plan for a full year. That’s February 29, 2012, just to be clear.

Two points from my personal experience:

Her husband might want to make sure whoever manages his HSA isn’t going to have fees for not being associated with the Blue Cross plan anymore (the individual coverage from Nov to February). That happened to me once. You can roll HSAs into other HSAs just like an IRA or 401k.

Also, My employer contributes to my HSA for me, and employer contributions count against the maximum. My benefits website accounts for this and will not allow contributions above the max, but make sure this doesn’t apply to you too.

@Steve (Q3): I just read the 2010 pub. You are right. There is a “Last Month Rule” that allows the full amount if you maintain HSA eligibility for the next 12 consecutive months. The proration kicks in if you do not keep qualifying insurance during the 12 months. Same rule applies for the $6150. If you fall into a proration situation, it’s a 10% tax penalty on the difference.
A few big things to note:
– contributions are usually exempt from State, Fed, and SS/medicaid taxes.
– After you hit (65?), you can treat the fund as an IRA and use it for non-medical expenses.
– some employers who offer HSA-qualified insurance do not always adhere to all of the provisions outlined in pub 969 (dis-allowing an FSA-to-HSA rollover).
– some states (Alabama being one) do not allow you to take the state tax exemption on contributions unless the contributions are made through a payroll deduction.

I totally agree with all commenters that he’s wrong again regarding the HSA. It is an AWESOME tool to use in retirement planning. YES, RETIREMENT PLANNING, just like #16 Roger said it can eventually be used for non-medical expenses. Anyway, by the time someone is old they’re going to need medical anyway. =)

I SECOND, THIRD, and FOURTH the importance of flood insurance if you’re anywhere near a body of water. I handle hazard (fire, flood, & wind) insurance for one of the major players in the mortgage industry. I see flood insurance bills every day! :) I know that if you are outside of a flood zone (‘preferred risk’) you can get $250K (federal maximum) of flood insurance for roughly $350/yr. Also, if you’re in a hurricane zone you should have it as well, if you only have wind insurance any water damage will not be covered, even if it is as the result of a hurricane. It’s like the old adage, ‘better to have it and not need it than need it and not have it’.

To add to what Johanna (#13) said, Slate recently ran an article about the negative effects of long commutes (obesity, depression, higher divorce rates, etc.) It’s worth checking out. I don’t want to end up in comment purgatory so I’m not linking it!

Also, I feel so very sorry for the kid in Q7. Of course we only have Jason’s side of things, but a parent who chooses his sig-o over his/her child doesn’t sound like much of a parent.

I agree with Johanna that you should not include a longterm 2-hour commute. Not worth it.

I wouldn’t jump so quickly into buying a house without knowing where you’ll be working or what career your husband will have. I would rent for a while to get a feel for what direction you as a family are going longterm, scope out the housing market, and buy a house not based on where coowrkers live. They could move at any time.

Q7: Few things in life are more heart-breaking than being rejected by one’s parents. Jason, if you love this kid and want to take him with you for a while, you can really help him and be a good influence, one that he will remember for the rest of his life. Kudos to you! I believe that you can teach him how to live a productive and independant life while setting strong standards of communal life.

Unlike Trent, I don’t believe that you can do much good if you “try” to help when his basic needs of food, shelter and security are not met. And remember that you are the boss in your home ! You are setting the rules !

In regards to #7 Jason’s question:
I don’t know what the situation is with your cousin. If he has issues, whether they are drug issues or mental health issues, then I’d really think carefully b/f sharing space with him.

I’ll just assume that’s not the case here, though. From experience, I can say that a lot of people just starting out at college tend to go crazy because their parents are no longer there to tell them what to do. Keep this in mind if you let your cousin move in. Set rules about doing dishes, taking out the trash, shoveling snow, cleaning the bathroom, being loud at night, having people over, anything you’d expect from a renter. Don’t be afraid to bring up any issues you may have. I’m not sure what your personality is like, but I used to be non-confrontational and it really took time for me to learn how to tell my roommates I was unhappy with them letting dishes pile up and not taking out the trash.

I think helping your cousin is great, but I’m not sure from your question what his plans are for college right now. Does he want to live with other college students near school? What are his finances like for school? What does rent cost near his school? Does he have a job? Does he have any money in savings?

If his finances are anything like mine were, I would have really appreciated a cousin I could stay with. Financial aid is based off of what your parents make, even if they aren’t supporting you at all. If they make a good living, he will be hurting even more when it comes to financial aid than if they made very little.

I don’t think you’re crazy for wanting to help a family member who seems to be in need. Just make sure you think it all through before having the talk with your cousin.

I’m with you on the early bedtime for children. We have a one year old and a three year old, and they are in bed by seven usually. That means we start the return at 6:30. Some parents we know are amazed by this, but the flip side is that our kids are early risers. Neither of us get any free time in the morning (read showers taken with fussing kids around), but that’s something I’m willing to deal with in order to have our quiet times together in the evenings.

Q2: I live in a city that flooded last year, and I can recommend a few things that people did here to help minimize damage to their homes. First, move everything you can to higher ground, whether that means another location (self-storage, family/friend’s home) or just a higher level of your house. Second, sandbag your property. Third, if you do flood, get back in there and clean it up ASAP.
Q8: I second Trent’s suggestion. I have family in Toronto and have visited there many times, and the mass transit is good enough that commuting by car, even from the nearby suburbs, is really unnecessary.

I believe Trent should read up on the HSA. Our company’s benefits advisor always tauts them as an excellent way to bump up your retirement savings if you’re already maxing out everything else. (Unfortunately, I’m not in their income bracket yet so I still use the super cheap HMO.)

Q2 – My understanding is that even flood insurance wouldn’t have helped you because this isn’t an “act of God”, but because the Corps of Engineers. That’s what I’ve heard from neighbors (I’m on the Nebraska side of this flood!)

@#3 As I understand it, if you have funds remaining in an HSA when you reach retirement age, you can convert the HSA to an IRA. The HSA is not like a flex account where you have to use the funds up or lose them; they remain in the account, earning interest until you use them or convert them at the end. So, you’re really saving for an emergency, with an option to convert to retirement if the emergency doesn’t arise. And, my HSA is paying way better interest rates than a standard passbook savings account, too. There’s a tax benefit involved, which shelters income, and you can save more for retirement than just what’s allowed under the IRA scheme if you don’t need it for medical purposes.

Dear Jim #21. You can’t always “kick them out” easily if they live with you. You have to go through court procedings to evict or you can be in legal trouble. What is the cousin like? Maybe there’s a reason neither parent won’t keep the 18 year old like laziness, destructive rages, drugs, excessive partying, theft. It’s like when your relatives want to borrow money from you and no bank will offer them a loan, THERE’S A REASON, and don’t do it! If the cousin is female, and you try to evict, she will go to the local battered women’s group, and they will tell her to hit herself, tear her shirt, and to then phone the police and claim you beat her. You will be arrested, booked, and locked out of your house while the female cousin will then have control of the house and contents for the forseeable future while you have to continue to support her and your house. In this case you are looking at a criminal record and thousands of dollars in legal fees, plus having to live elsewhere for six months or a year. Help the kid get a room somewhere and a job, and save yourself expense, a criminal record, and irritation.

We recently became debt-free other than our mortgage, and have turned our focus toward our savings. We have been banking at PNC/National City our entire marriage (4 years), and converted to PNC Virtual Wallet a few months ago. It is FABULOUS for saving. In the “Growth” account, you can create sub-accounts, and earn .85% interest on the whole thing. Plus, it’s super easy to transfer the money to your “Spend” account as needed. In our “Growth” account we have sub-accounts for “new car, taxes, vacation, maintenance, and emergency fun.” I have never been so excited about a bank account. My problem with savings before was tracking how much of the lump sum was set aside for each item. This problem has been completely solved.

We recently became debt-free other than our mortgage, and have turned our focus toward our savings. We have been banking at PNC/National City our entire marriage (4 years), and converted to PNC Virtual Wallet a few months ago. It is FABULOUS for saving. In the “Growth” account, you can create sub-accounts, and earn .85% interest on the whole thing. Plus, it’s super easy to transfer the money to your “Spend” account as needed. In our “Growth” account we have sub-accounts for “new car, taxes, vacation, maintenance, and emergency fun.” I have never been so excited about a bank account. My problem with savings before was tracking how much of the lump sum was set aside for each item. This problem has been completely solved.

I second (third? haha) the virtual wallet. Not too often you can get close to 1% interest (not that long ago it was over 1, sigh) from a bank that isn’t solely online. Transferring in and out of the high interest savings account to PNC checking account also does not take 3 business days.
In my experience, the sub accounts have been kind of buggy setting up, but I don’t use them often.

@Kevin: “If they’re living there for free, they’re a guest, and you can kick them out any time you want, for any reason at all.”

I suppose you may be legally within your rights to do this, but morally, it would be a supremely cruel thing to do in this instance. The cousin has already experienced betrayal and abandonment by the two most important adults in his life that he trusted to be there for him. By offering him a place to stay and then kicking him out just because you don’t feel like having him stay with you anymore, you’d be doing the same thing to him all over again. It would almost be better not to take him in to begin with – at least that way, you’re not making any promises you can’t keep.

So, Jason: We’re all doing a lot of speculation about what your cousin is like, because none of us know him except you. But if you think there is anything he might do that would make you want to kick him out of your home before the year (or whatever period you agree to) is up, I urge you to be very clear about that in the “house rules and regulations” that you draw up: Tell him that you have zero tolerance for X, Y, and Z in your home, and if he does any of those things, his stay with you is over.

(And of course, “X, Y, and Z” should be limited to serious infractions. Not stuff like failing to turn out the lights or take out the trash.)

And it’s looking like our pal deRuiter may have just smashed her(?) previous record for the most appalling comment posted to TSD. Women’s shelters tell women to fake being abused? I don’t even know where to start with that. And it’s not even applicable here, because Jason clearly said that his cousin is male.

Also, I have to comment on the 18 year old cousin. When I was 18, my parents (mom and stepdad)were in the midst of messy divorce. My mom didn’t want to be a parent anymore and my stepdad didn’t adopt me so he had no legal claim to me and was in the middle of an emotional breakdown. I was too much of a reminder of his mom so he didn’t want me either. Our house was sold and I was on my own. I was a straight-A student, graduated 3rd in my class, etc. I just had a crappy home situation. I lived in my car for a week or so until I found someone willing to help.

It’s quite possible that the 18 year old is a good kid in a bad situation and a healthy, helpful family member is just what he needs.

I’m a little surprised at the assumptions made about this 18 year old. Adults are just as capable of having issues as an 18 year old is. I agree, we don’t know the situation. But I’ve known plenty of people who were kicked out of their parent’s houses just because they turned 18, not for any fault of their own. There seems to be this idea that once someone is 18 they have to move out, but it’s not exactly easy in some areas to afford a place to rent. Attending college just makes the financial aspect more difficult to bear. I’ve also seen people end up in similar situations to #37 Jen, where it was the parents who had the issues, not the kid.

Trent there are no $4000 cars! If you do purchase one you are going to undoubtedly have to pay costly repairs sooner or later probably sooner. I challenge you to try to find a $4000 car you would feel good about purchasing. It’s crazy to keep on advising a $4000 car as an option.

mary #39 – we just bought one. It was a Cadillac Seville, 2001. 44,000 miles on it. It will easily last another 6 years, hopefully 10. They exist.

Our goal had been to buy a car every 5 years for $15K, so we save about $400/mo for this purpose. But if you can spend 10 months of your car fund to make it last 6 years, you’re ahead of the game. Will it cost us more in repairs than a brand new $15K car? Probably. But will it cost us $9K in repairs in the next 4 years? No way.

@ mary m
My car is a 1999 Nissan Altima. I paid ~$4500 for it about 3 years ago. It was high mileage ~115,000; now it’s at 139,000. It hasn’t had any problems. Before that I had a $10,000 used Kia Sportage that cost me like $1500 right after getting it because one of the wheel bearings had to be replaced. My dad got a fairly new Pontiac Torrent for much more than $5000, less than a year ago, and it’s had a leaky windshield and transmission issues. IMO buying a used vehicle is taking a chance even if it costs more than $4000, but some people are just not in a situation to afford much more than that.

Q4: My husband and I have a date night every couple of weeks. We go out for dinner, or drinks, or to catch live music, go to a movie, go on a long bike ride, etc. Basically anything that we can’t do with kiddo along for the ride. Also, my husband works second shift, so when he gets home, our kiddo is usually asleep, and we spend a couple of hours together. Mornings are family time. (Mind you, I’m actually a SAHM right now, and I don’t know what we’d have to do to modify this schedule once we started working.)

Q7: As others have said, only you know your cousin. Some of my cousins would have been absolutely fine to live with. Others I would not have touched with a 10 ft. pole. And to others who have said that if the kid is getting kicked out, he must be doing something wrong? My friend got kicked out b/c of trouble with his dad when he was 17. He stayed with my parents and me for awhile (we hadn’t graduated high school yet), but we didn’t have a lot of room (no extra bedroom, so he was sleeping on the couch in the living room), so he moved into his own place shortly before graduation. He wasn’t a bad kid, and he is a responsible, productive adult now. And he was a model “renter”. In fact, he was more responsible than I was at coming home at curfew, etc!

Even if you live on a hilltop, you STILL need flood insurance. If a tree or branch opens your roof to rain and water damage?? NOT covered by traditional homeowners insurance. Ditto for frozen pipes on the second story flooding lower levels.

As stated, if you are not in a mandated flood plain, you can still cover your home AND contents for $350-$500 a year, based on the value of your home and possesions….and YOU get to pick how much coverage you want to pay for.

And as my signature indicates, I do NOT work in insurance, nor does any one I know. I am just risk-adverse, since 96% of my net worth is in my home at the moment.

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